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1 Click to edit Master title style Portfolio Committee on Trade and Industry Colloquim on local public procurement Heading heading heading Date Transnet's local procurement of locomotives and wagons 1 April
2 Contents Topics 1. Transnet s localisation 2. Local locomotive procurement 3. Local wagon procurement 4. Challenges and solutions to support local procurement 2
3 In order to drive localisation, Transnet supports driving three different key localisation drivers Which are key pillars of SD In order to localise manufacturing, skills are a prerequisite to capability. Skills must be transferred from existing market players to local suppliers In order to be able to efficiently and sustainably manufacture locally, best practice and technology transfer needs to take place Technology and Technology Transfer Skills Development Localisation A key driver to local manufacturing capability is investment in plant and machinery. This will support the use of skills and technology Investment in plant 3
4 Transnet s ESD focus Suppliers SD focus Transnet s SD focus Through this approach Transnet aims to facilitate and influence established suppliers to engage with local emerging suppliers to enable downstream supplier development Transnet s iesd strategic approach is to focus on Tier 1 suppliers and to influence them to engage local Tier 2 and 3 suppliers Supplier development category Supplier base Sphere of control (leveraged procurement) iesd development A result of Transnet s iesd drive Tier 1 Systems Subsystems Tier 2 Assemblies Through a large locomotive transaction, GE partnered with a local manufacturer Siyahamba is now part of GE s supply chain Tier 3 Components Sphere of influence Other, R&M, skills transfer B-BBEE focus ED development Note: ED Enterprise Development / PP Preferential Procurement 4
5 Transnet has recognised four key areas of opportunity that has been leveraged in order to develop the local supplier base Socio-economic impact measured largely on factors decreasing imports, increasing local content and providing relevant skills transfer Impact on industry development High Low Low Targeted skills development Maintenance and repair capabilities Export potential Component manufacture / upgrade capabilities System / subsystem manufacture & assembly Operational Tactical Strategic Complexity and participant s risk High SD opportunities present themselves along the entire value chain While the large Capex transactions provide opportunities for system, subsystem and component manufacture and assembly manufacturing opportunities also lie in developing maintenance and repair capability To ensure the development of a competitive local supplier base, industry-specific skills transfer and skills relating to manufacture need to be driven by SD 5
6 Contents Topics 1. Transnet s localisation 2. Local locomotive procurement 3. Local wagon procurement 4. Challenges and solutions to support local procurement 6
7 1064 Locomotive OEM s and Transnet BT Electric locomotive 60% + local content CSR Electric locomotive 60% + local content GE Diesel locomotive 55%+ local content CNR Diesel locomotive 55%+ local content Total locomotives to be delivered Locomotives to be built by the OEM (Foreign Build) Locomotives to be built by TE (Durban) Locomotives to be built by TE (Pretoria)
8 1064 LOCOMOTIVES TFR s Supplier Development Progress to date # SD DESCRIPTION SD % COMMITMENT 1064 TOTAL SD PROGRESS TO DATE 1 Capacity & Capability 41.66% 4.09% 2 Industrialization 10.75% 1.96% 3 Technology and IP Transfer 6.56% 2.62% 4 Skills Development 3.01% 0.10% 5 Job Creation/Preservation 6.03% 0.63% 6 Small Business Development 0.99% 0.38% 7 Rural Development 0.12% 0.02% TOTAL SD 69.12% 9.80% The SD Commitment is to be delivered according to the agreed upon SD plans and will be delivered over the contract period of the 1064 delivery. 9.8% has been delivered so far. 8
9 The establishment of 2 locomotive production facilities will have a positive impact on Gauteng and KwaZulu-Natal Extent of development Gauteng Comments Development before investment Kwazulu-Natal Development after investment 2 facilities needed due to IP protection considerations The establishment of these facilities will enable the development of industry clusters around the production facilities with the following potential benefits: - Local economic development - Job creation - Rolling stock specific skills development - Technical skills development - Transfer of technology relating to locomotive component manufacturing & assembly Development before investment Development after investment 9
10 OEM s, and the scope of supply with TE 10
11 1064 Locomotives Progress to Date Koedoespoort OEM QUANTITY NO OF LOCOMOTIVES LOCAL MANUFACTURING/ ASSEMBLY General Electric South Africa Technologies (GE) 233 Diesels 6 completed Manufacture and completed in USA. 227 Transnet Engineering (TE) * 28 have been manufactured and assembled in SA. China South Rail (CSR) 359 Electric 40 completed Manufactured and completed in China. 319 Transnet Engineering (TE) * 15 have been assembled in SA. Durban * Manufacture of car bodies has commenced OEM QUANTITY NO OF LOCAL MANUFACTURING/ ASSEMBLY LOCOMOTIVES China North Rail (CNR) 232 Diesels 20 To be manufactured and completed in China. * First 2 locomotives have been completed and are being delivered to SA. 212 Transnet Engineering (TE) * To be manufactured in SA. Bombardier Transportation 240 (BT) Electrics 0 * First 2 carbody received in TE Bayhead. Transnet Engineering (TE) * Assembly of 1st locotive in progress. * 1st Bogie frame assembly in progress at Bayhead. The local manufacturing has begun and the reporting on the local content will commence in April 2016, the measurement and 11 reporting of this is being done in conjunction with SABS and the DTI.
12 Contents Topics 1. Transnet s localisation 2. Local locomotive procurement 3. Local wagon procurement 4. Challenges and solutions to support local procurement 12
13 TE s wagon success story. SD has been instrumental to develop local capability and local procurement Component Sub Elements Local Content Threshold (36 months and beyond) 1 Bogies Wheels, axles, bearings, Bogie Cast Components, springs 100% 2 Body Steel, welding 100% 3 Brakes Brake blocks, hydraulic piping, testing 70% 4 Drawgear Drawgear, couplers, knuckles, yokes 100% 13
14 Wagon components and local supply Component Supplier Local content per DTI requirement Bogie Current Local content achieved Wheels 34 Cast SCAW 34 Forged - Naledi Bogie cast components SCAW CSR SA Axels Swasap CRI Springs Foundry business Local suppliers Bearings Reelin Timken Cast - 100% Forged Not designated 100% by month % 100% Cast - 96% Forged Supplier is setting up a wheel machining plant in SA SCAW is currently 93% CSR is currently 0% but will be 100% by month % 100% Limited demand, in spikes of supply outside local suppliers are used 100% by month 25 80% 100% will be achieved by month 25 14
15 Wagon components and local supply - continued Component Supplier Local content per DTI requirement Body Current Local content achieved Steel Macsteel Aveng Trident Alert Tshwane Brakes Brake valves Knorr Bremse Wabtec Slack Adjusters Wabtec Ngolovan National Rail & Trading Brake blocks DCD Metpro FIP Federal Mougul Knorr Bremse 100% 100% as TE uses primary steel 70% 74% 70% 45% Current global market is very limited number of AAR approved suppliers 70% by month 25 Limited scope for further localisation due to limited demand to sustain suppliers 15
16 Wagon components and local supply - continued Component Supplier Local content per DTI requirement Draw Gear Current Local content achieved Draw gear Miner Enterprises 100% 30% of the draw gear is composed of rubber pads which have been localised A local daw gear refurbishment centre is planned for Uitenhage Couplers, knuckles, pins & yolks Scaw Benkling 100% by month 25 Scaw is currently 90% Foundry technology is being developed to increase capability and capacity to produce more local components 16
17 Contents Topics 1. Transnet s localisation 2. Local locomotive procurement 3. Local wagon procurement 4. Challenges and solutions to support local procurement 17
18 Challenges and solutions to supporting local procurement Challenges Solutions Local and global economic conditions have a direct impact on rolling stock commodities which has a short to medium term impact on demand for products Local companies not producing as per OEM s international standards Local companies not being able to access funding for expansion Timeframes within which local content must be achieved by must be able to take market demand conditions into account on an ongoing basis Longer contract periods to be entered into to try to smooth the fluctuating market conditions Leads times to meet standards must be planned and managed carefully by OEM s Ensuring that local companies go through Transnet ESD intervention programmes like Productivity SA, Rapid Process Improvement program, CSIR as well as other Trade and Industry development programs to assist them Assist suppliers with funding through Godisa Fund, IDC etc. and DTI s Incentives South Africa Inc needs to formulate a funding solution as we are not competitive on a global level Over-dependence of suppliers on Transnet Industry must expand services and production utilising common technologies and drive certification programs to be able to compete in the local and export markets Coordinate export market support, including export readiness measures and export marketing 18
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